Over the past year or so, we have converted about 20% of our clients from an individual policy over to a small group health plan through their business. Why would we do that, you ask?
Let’s answer that question by being specific about a real client of ours in the Greater Houston area. We’ll keep his name a secret and call them family X, but everything else is spot on.
First, we’ll define the client by saying that he is a small business owner, but operates as a sole proprietor and thus files a Schedule C on his personal tax return. This person has a Wife and three children, all boys, ages 4 through 8. The Wife does help him with the family business, but does not earn a salary per se.
There is nothing special about their medical needs other than the occasional bumps and bruises along with the quintessential Houston allergies which require medications.
In this case, the kid’s pediatrician is with Texas Children’s Pediatrics which does not accept any of the individual or family plans in the Greater Houston area. As of mid-2017, there are only four health insurance carriers that offer non-group plans and all are HMOs.
Unfortunately, Texas Children’s does not accept HMOs and is not in their network. The Wife’s OBGYN is also not in any of the HMO networks, but at least the Husband’s doctor is in two of the four HMO networks. Honestly though, that didn’t help much since he hadn’t been to his doctor in 4 years and it took him a good 5 minutes to remember his name!
So what did we do to help? In this case, we asked them to form an LLC with both the Husband and the Wife as co-owners of the LLC from the formation date of the company. This will provide them some legal protection as their business is now separate from their personal assets. This also allows them to form a small group health insurance plan which can be 100% paid for and 100% tax deductible through the new LLC – not so with an individual plan.
The advantage of the small group is that they now have access to a PPO option whereby all of the Texas Children’s doctors and hospitals, the Wife’s OBGYN and even the Husband’s doctor were all in-network with their new plan. The monthly rate was only $5 higher than a comparable HMO option in the individual market. The best part: The government has largely left the group insurance market alone from excessive regulations and therefore that market is far more stable on premium rates and also has many more options.
If they decide to hire other employees to help with the business, they can now offer their group health coverage as part of the compensation package and be more attractive to potential employees.
A Texas small group health insurance policy can be formed for any company that has 2-50 employees. If you want to see if this would work for you and your business, you can reach us at either 866.270.6209 or fill out our Small & Large Group Health Insurance Quote Request form.